International markets soar on back of deal in US to avoid fiscal cliff

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THE AUSTRALIAN dollar is higher following a positive reaction to the US deal to avoid the fiscal cliff, but has fallen back from its overnight highs.

At noon today, the currency was trading at 104.90 US cents, up from 104.73 cents yesterday.

It reached a fresh two-week high of 105.25 US cents early this morning as global share markets soared on news the US lawmakers had passed legislation preventing automatic tax hikes and spending cuts that threatened to send America into recession.

Westpac chief currency strategist Robert Rennie said the Australian dollar was performing well but had been unable to extend its rally on Thursday.

New York Stock ExchangeSource:AFP

At noon, the benchmark S&P/ASX200 index was up 28.8 points, or 0.61 per cent, at 4,734.7, while the broader All Ordinaries index rose 31.6 points, or 0.67 per cent, at 4,754.5.

On the ASX 24, the March share price index futures contract was up 24 points at 4,708 with 8,743 contracts traded.

The local market is still trading around a 19 month high and IG Markets Stan Shamu said local investors were in a good mood today.

"We've picked up on that lead in US trade with the fiscal cliff being averted for now," he said. "Everyone's feeling like buying at the moment."

Mr Shamu said many investors did not want to miss out on profits.

However, the current rally, which began in December, could slow down as investors began locking in gains.

Stock Exchange in FrankfurtSource:AFP

Late yesterday, US lawmakers approved a compromise bill that raises taxes on the rich and puts off automatic $105.39 billion federal budget cuts for two months.

Overnight in the US, the Dow Jones industrial jumped 308 points, or 2.35 percent, to close at 13,412, the first trading day of the year. That's the biggest gain the Dow has had since December 2011.